Lenders are cautious amid uncertainty over the economy and the furlough scheme as a wave of customers request mortgage holidays
First-time buyers desperate to get on the housing ladder while the stamp duty holiday remains in place are being forced to compete for mortgages in a mad scramble.
Lenders are now so cautious about lending to first-time buyers with just a 10 per cent deposit that they are limiting this type of lending to one day fire sales.
Mortgage experts say this type of ‘flash sale’ is only going to get more common.
Andrew Montlake, of mortgage broker Coreco, said: We will definitely see more of these flash sales as lenders look to help first-time buyers, but for short periods of time. Lenders are worried that if they open themselves up at this level for longer they will be inundated with applications and unable to cope.
It comes at a tough time for first-time buyers as most lenders have already pulled riskier low deposit deals as the economy seized up over lockdown.
Nationwide is the last remaining big lender to offer 90 per cent LTV deals on a full time basis, but is already being more restrictive about who it lends to, insisting borrowers have good employment records, clean credit and can demonstrate they can afford to repay the loan.
Coventry Building Society has also been offering mortgages for buyers with a 10 per cent deposits, but only in three day bursts.
Similarly broker-only lender Accord – part of Yorkshire Building Society – offered these deals recently but only over a 48-hour window.
Montlake added: The issue with this is that first-time buyers will not know when or where these new products will appear unless they happen to be lucky with the lender they approach or they are dealing with a professional mortgage broker who will keep on top of these notifications and are able to swoop in to lock the product for their clients.
It is not a perfect scenario by any means but it better to have a little of something than a lot of nothing, he said.
In future this leaves those with small deposits in the unenviable position of having their options severely limited and not being able to plan for when new deals come onto the market.
Lenders have mostly blamed staffing shortages forcing them to rein in new mortgage lending and focus on existing customers, with the majority of the country still working from home and a wave of customers requesting mortgage holidays.
Lower deposit mortgages usually take more work to underwrite, as they present a higher risk to the lender. As a result, if staffing problems at banks and building societies lead to deals being cut, it’s these deals that go first.
But it’s likely lenders are also taking a more cautious approach to who they lend to as they watch to see how the economy fares and, crucially, what happens to house prices over the next 12 months given the number of people losing their jobs and the furlough scheme set to end at the end of October.
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